Apple has much at stake in Tuesday's product launch

The iPhone is Apple’s major source of revenue, a trendsetter since it was released seven years ago and a prestige object on every continent.

But unless Apple Inc. makes a significant breakthrough with its product release Tuesday — a release that could be a new iPhone, or the much-predicted iWatch — its supremacy as a tech titan could be in jeopardy.

That’s because iPhone, which had 25.1 per cent of the smartphone market in 2012, according to market research firm IDC, is losing ground rapidly to other smartphone makers.

Pacific Crest analyst Andy Hargreaves has downgraded Apple, saying much hinges on it releasing a new product with the potential of the iPhone.

“We recommend taking profits in Apple,” Hargreaves wrote in a letter to clients. “Unless next week’s event details massive incremental profit opportunities, we are likely to downgrade Apple’s rating.…We do not expect either new segment to drive incremental profits that are meaningful at Apple’s scale in the near to medium term.”

Smartphone sales are still climbing worldwide — an estimated 23 per cent annually — and iPhone is seeing rapid growth in emerging markets such as China.

But it is on track to achieve just 14.8 per cent market share worldwide in 2014, according to IDC, a decreasing share of a growing market.

Shrinking market share for iPhone

“There is a large part of the market worldwide that is happy with the low-end smartphones,” said Krista Napier, an analyst on emerging technology with IDC Canada.

Mainly, Apple is losing ground to dozens of low-cost Android phones being churned out in China and elsewhere. It does not license its technology to independent manufacturers, so the price stays high — a considerable premium that has many new users heading for the Android options.

“There is still an opportunity for them to play in the high-end of the market, which they have always done, as we see emerging regions develop,” Napier said.

One key focus for Apple’s share in North America is to launch an iPhone 6 with a larger screen, she said.

Samsung already has phones with larger screens and other competitors are mulling a move into the same space.

“As a user adds apps, the larger screen size gives more real estate, for browsing on the web and for typing as well,” Napier said.

The iPhone 6 is forecast to come in two larger sizes than the current versions of the iPhone.

Revolution in mobile payments

But to retain its cachet as a trendsetter and the company that sets the next tech revolution in motion, most analysts are looking to Apple to launch a mobile payments system based on near-field communications technology.

NFC allows two devices to transfer encrypted data at short range using radio waves — from a mobile phone to a reader in coffee shop, for instance.

Mobile payment systems have been around for a few years, but there are several options for retailers and no clear standard of which system to use.

If Apple rolls out an NFC payment system with an iWallet app that links each user's payment options, all that could change.

Already, there are reports that Apple is rolling out iBeacon transmitters and NFC technology to its retail stores around the country, with partnerships reported with retailers such as Walgreens, CVS, Nordstrom and Disney.

Apple also has deals with major credit companies such as Visa, MasterCard, American Express and credit card issuers to support its mobile payments service. That might allow users to connect everything from their Starbucks card to their PayPal account with a smartphone.

Cachet is at stake

That may be one reason why Apple CEO Tim Cook was careful to make an announcement about security in the wake of reports that nude photos had been stolen from celebrity iPhones.

It’s hard to convince consumers to hand over credit card and other payment information if they suspect your security systems may be less than robust.

Because of Apple’s loyal fan base and cachet as the creator of breakthrough technology, iWallet and NFC could soon be the standard for mobile payments. Retailers will then rush to embrace a technology that has been a niche item until now.

The other rumoured rollout by Apple is some form of wearable technology, potentially an iWatch with features such as a monitor for heart rate and blood sugar, a GPS map and other features.

Wearable technology is in its early stages, IDC’s Napier said, but it’s important for Apple to “play in this space.”

“I think wearable devices will be quite big, not just for consumers, but it has huge applications for business as well,” she said.